38 Questions
What is the key difference between strategic alliances and joint ventures?
Strategic alliances do not form new business entities, joint ventures do.
Which best describes a multinational corporation?
A corporation operating in multiple countries to save costs.
What is the primary purpose of offshoring for companies?
To reduce the cost of labour by relocating operations to another country.
What is a common reason for companies to engage in mergers?
To increase efficiency and face competition better.
How do most businesses ensure ethical behavior among their workers?
By having a code of ethics that guides employee behavior.
What defines a retail business?
Generating profit by selling things to consumers
What is a domestic transaction?
Selling items within the same country
What benefits can businesses gain from international trade?
Increased quality of goods
Which type of business generates profit by doing something for other businesses or customers?
Service businesses
What is a key advantage of international markets for producers?
Increased production quantity
What distinguishes non-profit organizations from other types of businesses?
Goal is not to make a profit
Under what financing method does one use their savings or investor savings to run a business?
Equity financing
How does international trade impact labor costs in developing countries?
Leads to exploitation of workers
Why might some businesses prefer producing goods in countries with less strict environmental regulations?
To avoid strict environmental regulations
What is the primary advantage of joint ventures in international business structures?
Match the skills and expertise of two different businesses
What is the purpose of using tariff barriers in international trade?
To limit the entry of certain goods like narcotics and goods made from endangered animals
How do non-tariff barriers impact international trade?
By setting high quality standards that foreign businesses find difficult to meet
What does a trade surplus indicate for a country's economy?
The country is exporting more than it is importing
How do tariff barriers impact the prices of imported goods?
They raise the prices to protect local industries
What are some examples of non-tariff barriers to international trade?
Setting strict safety standards that foreign businesses find hard to meet
What is the key advantage of a sole proprietorship?
Ability to keep all profits
What is the main disadvantage of a sole proprietorship?
Unlimited liability
Which type of partnership has partners with unlimited liability for each other's debts?
General partnership
What are the two types of partnerships mentioned?
Limited partnerships and General partnerships
In international business, what does interdependence mean?
Countries depend on each other for survival
What distinguishes a private corporation from a public corporation?
Availability of shares in the stock market
What defines a crown corporation?
Government control
In what aspect do franchises differ from other business structures?
Ownership model
What is a distinctive feature of municipal corporations?
Government control
What is the main goal of most businesses?
To make a profit
What defines an entrepreneur?
Someone who starts their own business
What do economic resources, or factors of production, refer to?
The means through which goods and services are made available
Which type of economic resource refers to materials that come from the earth, water, and air?
Natural resources
What is the distinction between a need and a want?
Needs are essential for survival, wants add pleasure to life
Which term describes a product that is no longer used or produced?
'Obsolete'
What do entrepreneurs do in response to competition?
They innovate and offer better products or services
What role do human resources play in creating goods and services?
Creating goods and services
What is the primary impact of competition on innovation in businesses?
Competition drives innovation and new inventions
Study Notes
Strategic Alliances
- Agreements between businesses to achieve common objectives without forming a new business entity
- Each business commits resources to achieve a shared goal
Multinational Corporations
- Corporations operating in more than one country
- May operate in multiple countries to save money, e.g., by having production plants in countries with cheap labor
- Examples: having headquarters in a country with good leadership talent
Offshoring
- Relocation of a company's operations to another country, often to reduce labor costs
- Popular offshoring destinations: India (call centers and IT work) and China (manufacturing)
- However, as China develops, labor costs are rising, and manufacturers are moving to Southeast Asia
Mergers
- Two companies joining to form one company
- Reasons for merging: increasing efficiency in the face of competition
- Examples: AOL-Time Warner and Chrysler-Daimler-Benz
Business Ethics
- Ensuring workers behave ethically through a code of ethics
- A code of ethics outlines how employees should respond in certain situations
- Fraud: the crime of lying and deceiving for personal gain
Types of Businesses
- Retail businesses: generate profit by selling goods
- Manufacturing businesses: generate profit by turning raw materials into finished products
- Service businesses: generate profit by doing something for other businesses or customers
- Non-profit organizations: goal is not to make a profit, e.g., charities
Financing Options
- Debt financing: borrowing money to run a business
- Equity financing: using one's own savings or investor savings to run a business
International Business Structures
- Joint ventures: two businesses join to create a separate business entity
- Examples: Sony-Ericsson
International Trade
- Benefits:
- Access to markets
- Cheaper labor
- Increased quality of goods
- Increased quantity
- Access to resources
- Costs:
- Human rights and labor abuses
- Environmental degradation
Barriers to International Trade
- Tariff barriers: taxes on certain imports
- Non-tariff barriers: standards for the quality of imported goods
- Examples: limiting imports to protect local industries or prohibit certain goods
Balance of Trade
- Relationship between a country's total imports and total exports
- Trade deficit: paying more for imports than earning from exports
- Trade surplus: earning more from exports than paying for imports
Forms of Business Ownership
- Sole proprietorship: owned by one person, advantages: keeping all profits, disadvantages: unlimited liability
- Partnership: owned by two or more partners, advantages: shared responsibilities, disadvantages: unlimited liability
- Corporation: distinct legal status, owned by shareholders, advantages: limited liability, disadvantages: complex structure
- Co-operatives: owned by members or workers, primary interest is to serve members, not to make a profit
- Franchises: one business licenses its name, procedures, and expertise to another business
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